US Exempt Organisations (typically, charities or educational establishments) are subject to highly complex IRS rules regarding the source of their income, the nature of their activities etc, and as with all other sectors the Internet threatens to throw many established certainties into the melting pot.
Interactive web-site features, hypertext links and affiliate programs, all forms of activity which are peculiar to the Internet, can change the balance of an EO's status and its income flows, possibly leading to loss of exemption for part or all of its income. The IRS has not so far given much guidance on this subject, but has now issued a consultation document which poses many questions regarding the status of EOs on the Internet.
David E Hardesty CPA of Markle Stuckey Hardesty & Bott and progenitor of the ecommercetax website reproduces the consultation document on his site. The IRS document, says Hardesty, is an excellent list of the issues raised by EO use of the Internet. Some of the questions raised include:
Do political comments made in an organization-sponsored listserv or newsgroup, or links from the organization’s Web site to the site of a political group constitute political intervention by the organization? Political intervention (electioneering) is grounds for revocation of an organization’s exempt status.
Will certain activities, such as earning commissions from affiliate programs, result in unrelated business taxable income?
How are the rules relating to solicitation and receipt of contributions affected by the Internet?
How should Web site costs be allocated? This can have relevance when an organization must determine the level of expenditures for various activities. For example, an organization can engage in a certain amount of lobbying activities without endangering its exempt status.
The article also reports on remarks made in a panel discussion by Robert C. Harper, Jr., an IRS official, and Catherine E. Livingston, formerly Treasury Deputy Legislative Counsel.
The full article is at http://ecommercetax.com/doc/110500.htm
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